Arovella Therapeutics — OroMist pipeline development update

Arovella Therapeutics (ASX: ALA)

Last close As at 17/07/2024

0.03

0.00 (0.00%)

Market capitalisation

AUD26m

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Research: Healthcare

Arovella Therapeutics — OroMist pipeline development update

Arovella has announced the launch of ZolpiMist (an oromucosal spray for short-term insomnia) by partner STADA in Australia and the cessation by partner Strides Pharma of its development programme ALA-001 (preclinical) for an oral spray formulation of the migraine drug sumatriptan. The drugs are two of Arovella’s five pipeline assets being developed under its legacy OroMist platform, with ZolpiMist its most advanced asset. The termination of the ALA-001 programme will not have any immediate financial implications for Arovella as development was funded by Strides), although it raises uncertainty about future milestone and royalty payments. The commercial launch of ZolpiMist in Australia is the first globally and is a positive for the company. Our valuation does not include a contribution from ALA-001 and is unchanged at A$30.5m or A$0.05/share. We highlight that this also excludes Arovella’s early-stage cell therapy platform/pipeline and note the potential upside on clinical progression.

Jyoti Prakash

Written by

Jyoti Prakash

Analyst, Healthcare

Healthcare

Arovella Therapeutics

OroMist pipeline development update

Pipeline update

Pharma and biotech

30 June 2022

Price

A$0.02

Market cap

A$16m

A$1.44/US$

Cash and cash equivalents (A$m) at
31 March 2022

8.1

Shares in issue

658.8m

Free float

86%

Code

ALA

Primary exchange

ASX

Secondary exchange

N/A

Share price performance

Business description

Arovella Therapeutics is a biotech company focused on the areas of oncology and CNS diseases through its cell therapy and OroMist platforms. It recently acquired a CAR-iNKT programme for haematological malignancies and a DKK1 antibody that has potential in multiple myeloma and solid tumours. The legacy platform, OroMist, is focused on developing oromucosal spray versions of established medicines. It has ex-North America rights to ZolpiMist, the spray version of Ambien for insomnia.

Analysts

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Nidhi Singh

+44 (0)20 3077 5700

Soo Romanoff

+44 (0)20 3077 5700

Arovella Therapeutics is a research client of Edison Investment Research Limited

Arovella has announced the launch of ZolpiMist (an oromucosal spray for short-term insomnia) by partner STADA in Australia and the cessation by partner Strides Pharma of its development programme ALA-001 (preclinical) for an oral spray formulation of the migraine drug sumatriptan. The drugs are two of Arovella’s five pipeline assets being developed under its legacy OroMist platform, with ZolpiMist its most advanced asset. The termination of the ALA-001 programme will not have any immediate financial implications for Arovella as development was funded by Strides), although it raises uncertainty about future milestone and royalty payments. The commercial launch of ZolpiMist in Australia is the first globally and is a positive for the company. Our valuation does not include a contribution from ALA-001 and is unchanged at A$30.5m or A$0.05/share. We highlight that this also excludes Arovella’s early-stage cell therapy platform/pipeline and note the potential upside on clinical progression.

Year end

Revenue (A$m)

PBT*
(A$m)

EPS*
(A$)

DPS
(A$)

P/E
(x)

Yield
(%)

06/20

0.5

(3.6)

(0.03)

0.0

N/A

N/A

06/21

0.3

(3.4)

(0.01)

0.0

N/A

N/A

06/22e

0.4

(7.5)

(0.01)

0.0

N/A

N/A

06/23e

2.4

(5.8)

(0.01)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

In a positive development, Arovella announced on 22 June that ZolpiMist, its most clinically advanced asset, has been launched in Australia earlier than anticipated (previously expected in Q322) by licensing and distribution partner STADA Australia. This marks the first global launch of ZolpiMist, although we note that the drug has also received regulatory approval in Chile (out-licensed to Teva in Mexico, Brazil and Chile). STADA holds the option to expand distribution into New Zealand. Arovella is incorporating a child-resistant lock on its ZolpiMist dispensers and approval by the Australian regulators will trigger a A$40,000 milestone payment and a 10% royalty on sales (in addition to the supply price).

For ALA-001, Strides has cited a change in market dynamics as the primary reason for its decision to cease development. Arovella has communicated that it is restructuring the formulation group to match the reformulation projects, although it is unclear whether it will continue development with another partner. As a reminder, the development and licensing agreement was signed in November 2018 for developing and commercialising ALA-001 for the US market. The development was being funded by Strides, with Arovella providing the formulation, in exchange for an upfront payment of US$0.4m (A$0.56m), combined milestone payments of US$0.6m (A$0.83m) and royalty payments on commercial sales. As the drug is still in the pre-clinical stage, Arovella expects no implication on cost or immediate revenue inflows, although we anticipate that future income potential and/or timelines may likely be affected if the company chooses to continue development with a different partner.

General disclaimer and copyright

This report has been commissioned by Arovella Therapeutics and prepared and issued by Edison, in consideration of a fee payable by Arovella Therapeutics. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

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London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

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United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Arovella Therapeutics and prepared and issued by Edison, in consideration of a fee payable by Arovella Therapeutics. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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